Wednesday, November 14, 2018

When IRS proposed 403(b) regulations become final, employers will likely find themselves facing significantly increased compliance, liability and risk issues. The proposed changes imposed on 403(b) employers are of landmark proportions. Some of the notable changes include:
 
• Written plan documentation will be required for all plans
• Control and responsibility for plans will shift to the Employer
• Employers will be responsible for “meaningful notice”
• Changes to rules governing universal eligibility
 
It is important that employers understand the impact of the proposed regulations and recognize what will be necessary to remain compliant in the ever-evolving 403(b) arena. The impact of the changes may require employers to re-evaluate the effectiveness of internal management for their plans and the new compliance issues.

Frequently Asked Questions

When will the proposed IRS regulations be effective if passed?
The proposed regulations will be effective no earlier than January 1, 2006.

Will 403(b) programs require a Plan Document?
Once the proposed regulations are finalized, all 403(b) programs will be required to operate under a formal Plan Document that must meet IRS guidelines and be maintained going forward.

What does the IRS mean by “Control and Responsibility” by the Employer?
The IRS proposed regulations require Employers to not only support their 403(b) programs, but also to establish the terms required to administer the plan.

What is the meaning of “Meaningful Notice”?
Employers should be aware of their responsibility to give “meaningful notice” to all employees eligible to participate and afford them an “effective opportunity” to make or change an elective deferral.

What is meant by “Universal Eligibility”?
IRS will require employers to permit all employees to make salary reduction contributions to the 403(b) program unless the employees are in an excluded classification of employees.

How will changes to rules governing Transfers and Rollovers affect Account Portability?
The proposed regulations would prevent participants from transferring account balances to companies that are not authorized providers under their employer-sponsored plan.

What is the Deposit Requirement established by the proposed IRS regulations?
The proposed regulations require Employers of 403(b) programs to remit employee contributions within a very limited time period following each payroll period—the suggested deadline is the 15th business day following the payroll.

Asset Strategy Retirement Plan Consultants can help you navigate your 403b plan with new legislation and provide guidance with what plan vendors may be best for your employees.